An investigation by the Iowa Insurance Division (IID) of insurance companies that were allegedly telling consumers that they would have to pay the difference for repairs at shops that didn’t charge the prevailing rate has found no wrongdoing by those insurers.
“The complaint records were checked for any consumer complaints that dealt with [this] concern,” a letter from Angel Robinson, consumer advocate with the IID, read. “This was checked at the beginning of the investigation and has been monitored since that time. As of today, there are no complaints from consumers that an insurance company has required them to pay any additional costs of auto repairs outside of a deductible.”
The original complaint was filed by Tom O’Mara, owner of O’Mara Auto Body in Martensdale, last March. O’Mara, who raised his labor rate to $54 per hour due to the increasing cost of petroleum-based products, accused State Farm, Progressive and Nationwide of telling their customers that they would have to pay the difference if they chose a shop that charged over $50.
As a result of this accusation, Robinson undertook her own independent labor rate survey of shops in Polk and Warren counties (read story HERE). Her conclusion was that the insurer-supplied rates were comparable to the rates that came out of her own survey. Her findings were as follows:
Body & Refinish
Lowest rate: $32
Highest rate: $62
Most frequent rate: $52
Lowest rate: $54
Highest rate: $75
Most frequent rate: $65
Lowest rate: $50
Highest rate: $119
Most frequent rate: $65/$75
Paint & Materials
Lowest rate: $28
Highest rate: $38
Most frequent rate: $32
Iowa law states that if an insured claims, based upon a written estimate which the insured obtains, that necessary repairs will exceed the written estimate prepared by or for the insurer, the insurer shall: 1) pay the difference between the written estimate and a higher estimate obtained by the insured, or 2) promptly provide the insured with the name of at least one repair shop that will make the repairs for the amount of the written estimate.
“All the insurance companies surveyed provided numerous repair shops for consumers to choose from that will provide repairs at the insurance companies’ prices,” Robinson said. “This provides consumers with a variety of options for selection. If a consumer pays anything above the deductible towards a repair, it is by their choice and it will be a conscious decision as other options are presented and available for the same results.”
When Robinson asked insurers about their procedures for auto claims, in regard to the first option under the law stated above, they said they were generally open to negotiating on prices if a consumer insisted on a particular shop.
O’Mara was notably upset with the decision.
“My rates are reasonable, too,” he said. “She can say [the insurers’] rates are reasonable, yet they were telling my customers that they would have to pay the difference.”
O’Mara isn’t the only shop owner in Iowa who says he has had a problem with insurers telling customers they’ll have to pay the difference. Bob Yeske from Bob’s Auto Body in Spirit Lake says that State Farm tells him that every time he does a job for them.
“They won’t pay the going rate so they take your estimate and revise it down to their rate and send it back to you,” Bob said. “They then ask if you’ll agree to that and if you say no, they say that they’ll have to tell the customer they’ll have to pay the difference. To me, it’s blackmail. But I always end up accepting the lower rate because one thing that has allowed me to last 35 years is treating my customers well and making it as easy as possible for them.”
State Farm spokesperson Dick Luedke said the “pay the difference” accusation is true because it is part of the contract with the policyholder.
“We make it clear to our customers that they have the right to choose where their vehicle is going to be repaired. Then we make them aware of our Select Service program,” said Luedke. “If they choose a shop that is not part of our program and that shop charges a rate that is higher than the prevailing competitive price (which comes from a continuous survey of the repair shops in that geographic area), our customer, according to the terms of our contract, must pay the difference.”
Luedke said all repairers, whether they’re on the Select Service program or not, are free to submit their labor rates at www.b2b.statefarm.com, which is how State Farm determines the prevailing rate in a given market.